What are the 3*n + 2 factors?

alpha i, beta i, E(Rm), Vol(m) and…?

What are the 3*n + 2 factors?

alpha i, beta i, E(Rm), Vol(m) and…?

covariance

But covariance is beta i * beta j * var (m), so we don’t need to estimate it, right?

alpha i, beta i, variance of error term of i are your 3xn

+2 are Expected return of the market and variance of the market.